Edited version of private advice

Authorisation number: 1052193953196

Date of advice: 23 January 2024

Ruling

Subject: Status of worker - salary and wages

Question 1

Is the worker your common law employee under subsection 12(1) and employee under expanded definition under subsection 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes.

Question 2

Is the payment received by the worker 'salary or wages' under subsection 11(1) of the SGAA?

Answer

Yes.

Question 3

Is the payment received by the worker 'Ordinary times earnings' under subsection 6(1) of the SGAA?

Answer

Yes.

This advice

This advice applies for the following period:

Year ending 30 June 20YY

Year ending 30 June 20YY

Year ending 30 June 20YY

Year ending 30 June 20YY

The scheme commences on:

1 July 20YY

Relevant facts and circumstances

The payer (Principal) is a non-for-profit public benevolent institution, it is registered with the Australian Charities and Not-for profits Commission.

The Principal provides a number of services, programs and support throughout Australia in many areas such as foster care, people with disabilities, the homeless, aged care, people with mental health issues.

The National Disability Insurance Scheme (NDIS) provides funding to help eligible people with a disability get the support and services needed to improve their independence over time based on their individual needs.

People with disabilities (Participant/s) can have an individualised NDIS Plan which set out their goals, the support and funding required based on their needs. The plan may include reference to issues such as performing household tasks, daily personal activities, transport and mobility, therapeutic support and living arrangements.

Individualised Living Options (ILOs) are a relatively new service that is funded by the NDIS to help a Participant live in their choice of housing environment with the required day-to-day supports.

One of the ILOs is that a Participant lives in the home of an unrelated person or family (the Worker) that the Participant has chosen.

The Worker provides the at-home primary support for the Participant such as disability related support, as well as household and daily personal assistance, within a family-type environment.

The Participant can manage their NDIS Plan by themselves or engage with a registered provider.

The Principal is a registered Provider who works with the Participant, and any appointed guardian of the Participant, to identify the needs, primary support and supplementary support from the Worker.

The Principal assists to implement the Worker ILO arrangement.

The Worker signs a host carer agreement (the Agreement) with the Principal before providing living arrangement to a Participant. The agreement outlines the terms of providing support to a Participant with a disability as an approved Carer of the Principal.

The Agreement will be reviewed in twelve months as part of the annual review process to ensure that the Worker is providing services within the Principal's requirements, and that appropriate levels of care are being provided to the person/s in their care.

Any renewal of the Agreement will be subject to the Principal's discretion, which will be based on factors including completion of an Annual Carer Review, probity checks, home and environment checks and medical checks, as required. Where renewal of your Host Care Agreements proceeds, a new agreement will be generated and provided to you for your signature.

The Principal provides the Worker with any information (i.e. information that is available to the Principal) which is reasonably required to enable them to safely provide the care required to the person placed in their care.

The Principal provides the Worker access to a Care Team who will offer training, support and supervision to enable you to safely provide the care required to the person placed in your care. The Care Team will include specialist support staff according to the individual person's needs and available allocated funding.

The principal has on-call support 24 hours a day, seven days a week for any critical incidents or difficult situations that may arise in relation to the person placed in your care.

The Principal provides with access to a Learning and Development Program which will include a range of learning modules suited to the Worker's level of experience.

The Worker agrees to provide the day-to-day care of the person with a disability whom they are supporting and assist them to meet the goals identified in their individual Care Plan to address their safety, welfare and welling needs.

The Principal provides care to the standards set by the Principal as directed by the Care Team and in accordance with relevant Principal's Policies and Procedures.

The Worker is responsible for safely transporting the person in their care to education programs, medical appointments, social commitments, and community activities where relevant, and will require an appropriate valid WA Motor Driver's Licence at all times.

The Worker cannot engage any other person to care for the disability Participant without permission from the Principal, unless it is within delegated discretion limits involving occasional minding arrangements. Any overnight alternative care arrangements will require prior permission from the Principal.

The Worker is solely responsible for their incidental cost and normal household expenses incurred during the provision of services to the person in their care.

The Principal pays the Worker fortnightly.

There are no specific qualifications required of the Worker.

Participants outline how many hours they require support in their Service Proposal. The support includes primary support and supplementary support. The level of support varies among Participants.

Primary support from NDIS's website includes personal care, cooking, cleaning etc.

Supplementary support includes back-up support for primary support, on-call arrangement, volunteers etc.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 section 6

Superannuation Guarantee (Administration) Act 1992 section 11

Superannuation Guarantee (Administration) Act 1992 section 12

Superannuation Guarantee Ruling SGR 2009/2 Superannuation Guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'

Reasons for decision

The SGAA requires that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the Superannuation Guarantee Charge (SGC).

While the term 'employee' which is defined in section 12 of the SGAA, includes common law employees, it also extends to include workers who are engaged under a contract wholly or principally for their labour. This employment relationship is often referred to as a 'contract of service'. This relationship is distinguished in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? from a 'contract forservice' which is typically a contractor and principal type of relationship and does not attract an SGC liability.

Therefore, it is necessary to consider not only whether there is a common law relationship of employer/employee between the parties, but also, if the common law test is not met or is inconclusive, whether the extended definition of 'employee' in subsection 12(3) of the SGAA applies. If a worker is not an employee under subsections 12(1) or 12(3) of the SGAA, their status is described as an independent contractor and there is no SG obligation.

The task of defining the characteristics of the contract of service - the employment relationship - has been the subject of much judicial consideration. As a result, some general tests have been developed by the courts to assist in the determination of the nature of the relationship. However, defining the contractual relationship between the employer and employee can be difficult and will depend on the facts of each case.

Accordingly, it is necessary to determine the true nature of the whole relationship between the principal and the workers, as to whether there was a common law employer and employee relationship, or whether the workers meet the extended definition of employee under subsection 12(3) of the SGAA.

Question 1

Is the worker your common law employee under subsection 12(1) and employee under expanded definition under subsection 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Common law employee

In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors we have considered are discussed below.

Terms and circumstances of the formation of the contract

The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. We must determine the nature of the contract between the parties, consider whether the contract is written or verbal, and whether the terms and conditions are expressed or implied. These factors are important in characterising the relationship between the parties.

When considering the intentions of the parties in forming the contract, it must be determined what each party could reasonably conclude from the actions of the other. Simply defining someone as a contractor does not necessarily lead to the conclusion that the individual is providing services as part of an operation of their own independent business.

Control

The extent to which the engaging entity has the right to control the manner in which the work is performed is the classic test for determining the nature of a working relationship. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lays not so much in its actual exercise, but in the right of the employer to exercise it.

Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb ((1986) 160 CLR 16 at 36) (Stevens v. Brodribb), where they state:

In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee.

Application

In this case, the employer has control over what and where the tasks are to be done. The Worker enters an agreement with the Principal to provide day-to-day care to a disability Participant. The daily care includes household tasks, personal daily services activities, transport and mobility services etc. These tasks are to be done in the Worker's home. The Worker is required to follow relevant the Principal's Policies and Procedures when they provide personal care to the Participant.

The Agreement between the Principal and the Worker is subject to be reviewed every twelve months. The Agreement will be reviewed to ensure that the Worker provides services as per the Principal requirements and that appropriate levels of care are being provided to the Participant. Any renewal of the Agreement is subject to the Principal's discretion. The discretion is based on factors like completion of an Annual Carer Review, probity checks, home and environment checks and medical checks. The working conditions listed in the Agreement indicates that there is control by the Principal over the quality of services the Worker provides.

Does the worker operate on his or her own account or in the business of the payer?

If the worker's services are an integral and essential part of the business that engages them (under a contract of service), they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business (under a contract for services), they are an independent contractor. It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer.

The professional skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills.

Consideration may also be given to whether the worker could be expected to generate goodwill in their own right.

Application

The Worker provides home care services in their home environment, these services are domestic in nature. There are no specific qualifications required to be a carer of the Principal. The Worker who provides home care to a Participant is not considered conducting a business, as there are no professional skills involved. In this case, the worker is seen as operating in the business of the Principal.

Results' contracts

The meaning of the phrase 'producing a result' means the performance of a service by one party for another where the first mentioned party is free to employ their own means (that is, third party labour, plant and equipment) to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not to do work.

Satisfactory completion of the specified services is the result for which the parties have bargained. That is, a payment becomes payable when, and only when, the contractual conditions have been fulfilled.

Application

There is nothing in the Agreement to indicate that the Worker is paid for a result. They are not paid after the completion of a particular task, instead they are paid fortnightly as a reward for their services provided.

Whether the work can be delegated or subcontracted

The power to delegate or subcontract (in the sense of the capacity to engage others to do the work) is a significant factor in deciding whether a worker is an employee or independent contractor. If a person is contractually required to personally perform the work, this is an indication that the person is an employee.

When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker; rather the employee has merely substituted or shared the workload.

However, a clause in the contract may permit the worker to delegate the task to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site or who may not be suitably qualified.

Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider.

Application

The Worker cannot delegate the care to someone else without receiving prior permission from the Principal. The only exception is that there is occasional minding arrangements under the Host Carer discretion limits. The Agreement clearly states that any overnight alternative care arrangement will require prior permission from the Principal. The Agreement requires the Worker to perform home care tasks personally and therefore, the agreement is the one for services.

Risk

Generally speaking, employers are vicariously liable for negligence and injury caused by their employees, whereas a principal will not be liable for negligence or injury caused by an independent contractor.

Another consideration of risk is the liability for the cost of rectifying faulty work. That is, the key underlying consideration is whether the individual is exposed to commercial risk in terms of a liability to cover the cost of rectifying defective work.

This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business.

Application

It is not clear in the contract who is liable for negligence and injury caused by the Worker. Neither it is clear who bears the cost of rectifying faulty work. However, the Worker is NOT seen to be exposed to commercial risk by providing domestic chores.

Provision of tools and equipment and payment of business expenses

A worker/payee who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required to complete their work by the employer. Furthermore, the employer is often also responsible for the business expenses incurred by the worker, since the worker has been integrated into the employer's business.

Independent contractors carrying on their own business often provide and pay for their own assets, tools, equipment, maintenance costs and other expenses. Usually, they will have factored these costs in their overall fee or they will seek separate payment for such expenses from the principal.

Application

There is support provided by the Principal to ensure the Worker can complete their work. The Principal provides the Worker any information they need to safely provide the care required by the Participant. The Principal also provides the Worker with access to the Care Team who offers training, support and supervision to enable the worker safely provides the care required to the Participant. Access to 24-hour support from the Principal is available if a crisis arises where the Worker requires advice or assistance from the Principal staff. the Principal also provides access to a Learning and Development Program for Workers with different level of caring experience. The Worker is seen being integrated as an employee into the Principal's business.

Our conclusion regarding the common law definition of employee

With respect to the relationship between you and the Worker, the facts and evidence provided points to the conclusion that the Worker is a common law employee of the principal.

Extended definition of employee for SGAA purposes

The extended definition of employee within subsection 12(3) of the SGAA states:

If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.

SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA.

Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that:

•         the individual is remunerated (either wholly or principally) for their personal labour and skills;

•         the individual must perform the contractual work personally (there is no right to delegate); and

•         the individual is not paid to achieve a result.

The contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA.

Wholly or principally for labour

In this context, the word "principally" assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil.

A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour.

Based on the available facts and evidence, we consider that the worker is paid primarily for their own labour and skills.

The individual must perform the duties themselves

As discussed earlier, we consider that the facts and evidence indicate that the Worker does not have the right to delegate work to others.

Not paid to achieve a result

As discussed earlier, we consider that the facts and evidence indicate that the Worker is not paid for a result.

Our conclusion regarding the extended definition of employee

Accordingly, the facts and evidence indicate that the Worker also meets the extended definition of employee as set out under subsection 12(3) of the SGAA.

Conclusion - overall

After considering all available facts and evidence relating to the working relationship between you and the Worker, the Commissioner concludes that the Worker meets the definition of an employee, for the purposes of the SGAA under both the common law test and extended definition as set out in subsection 12(3) of the SGAA.

Therefore, you have an obligation to provide superannuation support to Worker in accordance with the SGAA.

Question 2

Is the payment received by the worker salary and wages as defined under subsection 11(1) of the SGAA?

Answer:

Yes.

Detailed reasoning

Salary or wages, is defined in subsection 11(1) of SGAA. Salary or wages under the Act includes:

(a)    commission; and

(b)    payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate; and

(ba)    payments under a contract referred to in subsection 12(3) that are made in respect of the labour of the person working under the contract; an

(c)    remuneration of a member of the Parliament of the Commonwealth or a State or the Legislative Assembly of a Territory; and

(d)    payments to a person for work referred to in subsection 12(8); and

(e)    remuneration of a person referred to in subsection 12(9) or (10). 48.

Under subsections 11(2) and 11(3) of SGAA, certain payments are excluded from being salary or wages. They are

11(2)     Remuneration under a contract for the employment of a person, for not more than 30 hours per week, in work that is wholly or principally of a domestic or private nature is not to be taken into account as salary or wages for the purposes of this Act.

11(3)     Fringe benefits within the meaning of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) are not salary or wages for the purposes of this Act.

The Worker is considered an employee of the Principal as discussed in Question 1 and 2. The Worker is required under the Agreement to provide day-to-day care to a disability Participant in their home. The Worker is responsible for safely transporting the Participant to education programs, medical appointments, social commitments, and community activities. The Worker is required to have an appropriate valid motor driver's licence. The primary and secondary support provided by the Worker is expected to be 30 hours or more each week. Therefore, the exception under subsection 11(2) of SGAA does not apply, the payment received by the Worker is salary and wages.

An employer will only be liable to fringe benefits tax if a "benefit" is provided to an employee, or his or her associate, and that benefit is a "fringe benefit". There is nothing in the Agreement indicates the Principal pays a fringe benefit to the Worker, therefore, the exemption under subsection 11(3) does not apply.

In this case, the Worker receives payment under the Agreement in respect of the labour of they provide. Therefore, the payment represents salary and wages under the SGAA.

Question 3

Is the payment received by the Worker ordinary time earnings (OTE) as defined under subsection 6(1) of the SGAA?

Answer:

Yes.

Detailed Reasoning

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of:

(a)   the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or

(b)   the maximum contribution base for the quarter - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee.

The Commissioner's views on OTE generally, including an employee's ordinary hours of work, are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'.

Paragraphs 13 to 18 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state:

13.    An employee's ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

14.    The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and other hours. In particular, it would be expected that the other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.

15.    Any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employees 'ordinary hours of work'.

16.    If the ordinary hours of work are not specified in a relevant award or agreement, the 'ordinary hours of work' are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked.

17.    In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee's work. If so, the actual hours worked should be taken to be the ordinary hours of work.

18.    'Ordinary hours of work' are not necessarily limited to hours to be worked between 9am and 5pm, Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) include hours to be worked at other times, including at night, on weekends or on public holidays.

Paragraph 25 of SGR 2009/2 talks about ordinary hours of work;

Earnings 'in respect of ordinary hours of work' means all earnings other than overtime

25.    All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work.

Furthermore, SGR 2009/2 at paragraph 72 and 73 discusses expenses and reimbursements

Certain payments that are not 'salary or wages'

Expense allowances and reimbursements

72.    Expense allowances, that is, those allowances paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages'.

73.    A reimbursement that compensates an employee for an expense they have incurred on behalf of the employer is also not 'salary or wages'.

The earnings paid to the Worker are not expense allowance, it is made for the labour provided by the Worker to serve a disability Participant. The Worker will be solely responsible for their own incidental costs and normal household expenses incurred during the provisions of services to the person in their care. Therefore, the payment to the Worker represents the rewards for the services they provide to the Participant.

The Worker has to bear the household cost incurred while caring for the Participant as stated under the Agreement. As there is no expense incurred on behalf of the employer, and no reimbursement is necessary. Therefore, the payments the Worker receives is considered OTE.